No shock: data show software patent suits are on the rise, driven by trolls.

Share this story

The Government Accountability Office has a new report out about patent litigation. The study, which was commissioned as part of the America Invents Act, really features little in the way of useful conclusions or policy suggestions. It ends with a call that the Director of the Patent office "consider examining trends in patent infringement litigation" in order to make the examination process better and suggests (obviously) that better "patent quality" would be better for everyone.

Of course, the reason the balance of power is so permanently out of whack at the Patent Office is that examiners must approve or deny patents after less than 20 hours of examination. And the Patent Office's expenses aren't paid with tax dollars; they're paid entirely by applicants—the companies and individuals that want more patents and have no interest in the public or competitors stopping their forthcoming monopolies.

GAO doesn't get into the damage that trolls are causing to mainstream, non-tech businesses like retailers and supermarkets, or the estimates of the damage they cause (about $29 billion annually in direct legal costs, according to one widely cited study).

In the end though, the fact that strong policy moves are missing from the report may not matter much. Congress is already showing unprecedented motivation to look at the problem, with six bills related to patent abuse introduced since the beginning of the year.

The report does feature some useful statistics that sharply illustrate a few points already well-understood on an anecdotal level. That is, patent litigation is on the rise, and the culprits are broad software patents often asserted by "patent trolls," which the government can't decide whether to call PAEs (patent assertion entities) or PMEs (patent monetization entities).

There has been a rise in the number of lawsuits that's relatively easy to calculate; however, it is true that a big reason for the increase in lawsuits between 2010 and 2011 is the advent of the America Invents Act. That law has compelled patent enforcers who used to file sprawling multi-defendant lawsuits to divide up their claims, most of the time into individual lawsuits against individual defendants.

That change continues to spawn essays suggesting that there is, essentially, no problem with the current patent system and that the litigation crisis is basically something made up by a few big tech companies that just don't like being sued. The relevant question is how many defendants are getting sued each year and is that number going up, down, or sideways?

As is clearly visible in the graph above, the data show that many more companies are getting sued than were a few years ago. That's true even though the number of lawsuits has held relatively steady over the last five years. The increase in defendants, the next graph shows, is driven by software patents.

From 2007 to 2011, 65 percent of defendants were sued over software-related patents. Software patents accounted for 89 percent of the increase in defendants over this period. The software patents are, very often, wielded by patent trolls:

In the same four-year time period, 84 percent of the patent lawsuits initiated by "patent monetization entities" involved software patents, as opposed to 35 percent of the lawsuits involving just operating companies.

And of course, these figures don't take into account the thousands of small businesses that have been roped into some patent campaigns that seek to collect royalty payments simply by using threatening letters and phone calls.

Trolls overall accounted for a minority of lawsuits in the years studied by GAO; by 2011, they accounted for 24 percent. However, the GAO uses a conservative definition of patent-monetization entities that excludes individual inventors, which account for another eight percent. More recent data have shown that trolls are now responsible for a majority of patent claims—about 61 percent in 2012.

The report has a few other interesting tidbits. For example, when the GAO spoke to some trolls (PMEs), it noted that they got their patents from different sources. Some claimed they were "once upon a time" companies that used to make products; others straight up told the GAO that it was just very easy to get patents, "even with minimal R&D investments, especially for software-related processes." That seems like a fair descriptor of the kind of patent-producing "invention sessions" held by Intellectual Ventures.